Closing the Week with Investing.com
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U.S. stocks fell on Friday as a budgetary impasse involving the White House and congressional Republicans dragged on with no deal in sight. At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.27%, the S&P 500 index was down 0.41%, while the Nasdaq Composite index slid 0.70%.
At the end of this year, the Bush-era tax breaks and other benefits expire at the same time deep cuts to public spending kick in, a combination known as a fiscal cliff that could push the U.S. economy into a recession next year if the nation’s leadership fails to avoid it.
The White House has insisted fiscal reforms should include tax hikes on the top 2% of U.S. earners, something opposed by Republicans, who say they want to see more details from the Obama administration when it comes to cutting spending to narrow deficits and pay down debts. Both sides made little progress on Friday, which gave investors reason to avoid U.S. stocks.
Elsewhere, the U.S. Bureau of Labor Statistics reported earlier that the country’s consumer price index decreased by 0.3% in November from October, more than expectations for a 0.2% contraction and off from a 0.1% rise the previous month. Year-on-year inflation rates came to 1.8%, below forecasts for a 1.9% reading.
The U.S. core consumer price index, which excludes more volatile food and energy costs, rose 0.1% last month, missing expectations for a 0.2% rise and off from a 0.2% increase in October.
Elsewhere, the Federal Reserve reported earlier that U.S. industrial production beat expectations in November, expanding 1.1% after a 0.7% decline in October. Analysts had expected industrial production to rise 0.3% in November.
Meanwhile, the Markit research group reported that the U.S. manufacturing purchasing managers’ index climbed to a preliminary 54.2 in December, its best performance since April, from 52.8 in November, beating market forecasts for a decline to 52.6.
Leading Dow Jones Industrial Average performers included Alcoa, up 1.75%, Hewlett-Packard, up 1.72%, and Caterpillar, up 0.70%.
The Dow Jones Industrial Average’s worst performers included American Express, down 1.85%, Microsoft, down 1.07%, and Walt Disney, down 0.90%.
European indices, meanwhile, finished mixed.
After the close of European trade, the EURO STOXX 50 rose 0.11%, France’s CAC 40 fell 0.06%, while Germany’s DAX 30 finished up 0.19%. Meanwhile, in the U.K. the FTSE 100 fell 0.13%.
The dollar fell against the world’s major currencies on Friday after inflation figures came in weaker than expected.
In U.S. trading on Friday, EUR/USD was up 0.61% at 1.3156.
The Federal Reserve recently ramped up its stimulus programs and said interest rates will remain at rock-bottom levels as long as unemployment rates hover above 6.5% and as long as annual inflation rates stay below 2.5%, which market participants viewed on Friday as increasingly unlikely in the distant future.
The better-than-expected industrial production numbers from the Fed prompted investors to sell the dollar and go longer on higher-yielding asset classes earlier, though fears a budgetary impasse in Washington that could potentially contract the economy next year if left unresolved bolstered the greenback on the flipside.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.26% at 1.6155.
The dollar was down against the yen, with USD/JPY trading down 0.14% at 83.53 and down against the Swiss franc, with USD/CHF trading down 0.56% at 0.9183.
Market participants viewed the Japanese currency as oversold. The USD/JPY pair was likely to find support at 82.32, the earlier low, and resistance at 83.96, the earlier high.
The yen has slumped in recent sessions on growing market sentiments that Shinzo Abe, the country’s Liberal Democratic party candidate and champion of loosening monetary policies to stimulate the economy, will become the next prime minister.
Elsewhere, two Japanese economic indicators fell short of expectations.
The Tankan Large Manufacturers Index came in below expectations at -12, off from consensus forecasts for a -10 reading, while the Tankan Non-Manufacturers Index came in at 4, missing analysts’ calls for a 5 figure.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.15% at 0.9864, AUD/USD up 0.30% at 1.0560 and NZD/USD trading up 0.20% at 0.8449.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.39% at 79.69.
Gold prices traded steady to higher on Friday as cautious bargain hunters snapped up positions amid persistent concerns that a budgetary impasse in the U.S. could tip the economy into a recession, which could spark safe-haven dollar demand.
Gold and the dollar trade inversely from one other.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 0.05% at USD1,697.65 a troy ounce in U.S. trading, up from a session low of USD1,694.65 and down from a high of USD1,701.65 a troy ounce.
Gold futures were likely to test support USD1,694.65 a troy ounce, the earlier low, and resistance at USD1,701.65, the earlier high.
Gold prices dropped in recent sessions on fears that a fiscal impasse may push the U.S. into a recession next year.
The White House and Congressional Republicans continue to differ over how to narrow deficits and pay down debts as part of a budget agreement for 2013.
Democrats have been calling for tax hikes on the top 2% of U.S. earners, while opposition Republicans have said deficit-reduction measures should focus more on cutting spending.
Both sides of the U.S. political aisle continue to converse on Friday with no deal in sight yet, though a few market participants crept out of the safe-haven dollar and took positions in the yellow metal.
Solid U.S. economic data sent gold prices rising as well.
Crude oil futures rose in U.S. trading on Friday after Chinese manufacturing data came in strong, fueling hopes the global economy may be gaining steam.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD86.65 a barrel on Friday, up 0.88%, off from a session high of USD86.91 and up from an earlier session low of USD86.06.
The China HSBC flash purchasing managers’ index hit 50.9 for December, a 14-month high.
A figure above 50 indicates expansion.
The news sparked demand for oil on sentiment a stronger global economy will demand more fuels and energy going forward.
Solid data out of the U.S. pumped up oil prices as well.
Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were up 1.19% at USD107.72 a barrel, up USD21.07 from its U.S. counterpart.
Natural gas futures extended Thursday’s losses into Friday on forecasts for warm weather to continue across much of the northeastern U.S.
Rising supply figures continued to keep prices down as well
On the New York Mercantile Exchange, natural gas futures for delivery in January traded at USD3.340 per million British thermal units, down 0.22%.
Weather forecasts earlier this week predicted mild temperatures to run for the next two weeks for a large swathe of the country, including the heavily populated northeastern U.S.
Warm weather cuts into demand for heating in the country’s businesses and homes, a key driver of natural gas prices.
The heating season from November through March hikes demand for U.S. natural gas.
Rising supplies pushed prices down as well.
The U.S. Energy Information Administration reported earlier this week that natural gas storage in the U.S. in the week ended December 7 rose by 2 billion cubic feet, compared to expectations for a decline of 4 billion cubic feet, which further pushed down prices.
Total U.S. natural gas storage stood at 3.806 trillion cubic feet as of last week. Stocks were 48 billion cubic feet higher than last year at this time and 283 billion cubic feet above the five-year average of 3.523 trillion cubic feet for this time of year.
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